As this week’s deadline neared, the investor Warren Buffett, among others, likened threatening default to a kind of economic nuclear warfare. The White House approached the confrontation with the gravity of those October days a half-century ago when President John F. Kennedy stared down Nikita Khrushchev over the Soviet Union’s nuclear missiles in Cuba. If Mr. Obama blinked this time, he and his advisers believed, he would invite more showdowns and threaten his already limited leverage to enact the rest of his second-term agenda. (From this monring's NYT)
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The word many Mexicans now use to describe Washington reflects a familiar mix of outrage and exasperation: berrinche. Technically defined as a tantrum, berrinches are also spoiled little rich kids, blind to their privilege and the effects of their misbehavior.
“It’s a display of American arrogance,” said Raúl Silva, 40, an entrepreneur grabbing coffee at an upscale cafe here. “It’s a problem, and it’s going to affect us.”
Faced with Washington’s march toward a default, the world has reacted mostly with disbelief that the reigning superpower could fall into such dysfunction, worry over global suffering to come and frustration that American lawmakers could let the problem reach this point. (From this morning's NYT)
I don't know how many Americans have been paying attention to what has been going on in Washington the last few weeks, or how many care. I was talking to a neighbor--a retired lawyer who used to work for the govt--and he hadn't a clue. We're all the time living through things and missing the meaning of them, even if we're paying attention. So I've been paying attention, but have little confidence I understand the meaning. But it strikes me that, while this moment is not likel go down in the history books as the political economic equivalent of the Cuban Missile Crisis, it is, nevertheless, a significant historical moment.
I'm not talking about the specific economic impacts of what's happening this week so much as what this move by the Tea Party symbolizes. Al Qaeda's destruction of the World Trade Center was also primarily symbolic, but in Osama bin Laden's wildest dreams. he could never do as much damage to the system he hates as these Tea Party Yahoos are threatening to do. (Or just maybe they're not yahoos. Maybe they are really covert Al-Qaeda operatives, and Ted Cruz is their Khalid Sheik Mohammed. Hmmm.)
Whoever they are, I don't expect them to succeed in imploding the world financial system--this week, anyway. But we have learned that the "system" is a lot more vulnerable to this kind of political takedown than I, at least, thought it was. We've learned that a group of 50 zealots following means that are perfectly legal can bring the government to its knees by threatening a financial meltdown. We've learned that it comes down to one guy--the Speaker of the House--to make a decision to call a vote or not to. And while it's almost certain that John Boehner will call a vote even if he has to break the Hastert Rule, he might lose his speakership if he does, and what if he's replaced by a Tea Party zealot? Will the new speaker break the Hastert rule when all this happens again in January or Februrary?
This group of fifty is going to keep pounding, and if they are given enough time, the wall will be breached. The only way I see to stop them is to reduce the Republicans in the House to a minority, and how likely is that? Well, what if moderate Republicans in purple districts find they must either defect to the Democrats or get Christine O'Donnelled? Why not make an Arlen Specter move before getting primaried? Leave a party that is dominated by zealots you despise or lose your job? Seems like a no-brainer. The 2014 midterms are going to be pretty interesting. If there is a historical moment here, it might be because an historic realignment regarding the party system is in the works. We'll see about a year from now.
And this is at the very least a benchmark in another historical shift, which is the world sees it can no longer rely on the U.S. or the dollar as the anchor of financial stability. This will have consequences.